US tariffs on Chinese imports could put as many as 16 million jobs at risk in China, especially in the manufacturing of goods for retail and wholesale, said analysts at the US investment bank Goldman Sachs.
“If high US-China tariffs were to persist and Chinese exports were to fall precipitously, labour markets would surely feel the pressure,” the bank said in a research report released on Sunday, adding the 16 million jobs would be involved in the production of exports to the US and nearly one-quarter would be in the wholesale and retail spaces.
Goldman Sachs called communication equipment, apparel and chemical products “more vulnerable” than other manufactured goods thanks to their “high share in US-bound exports from China”.
US President Donald Trump, to ameliorate trade deficits and boost domestic production, has imposed tariffs totalling 145 per cent on Chinese imports so far this year, bringing the effective tariff rate to about 156 per cent. According to a fact sheet released by the White House, China now faces tariffs of up to 245 per cent on certain goods.
In response, Beijing has applied tariffs of 125 per cent on all US goods on top of earlier duties.
China’s 24-person Politburo, a high-level body of the Communist Party headed by President Xi Jinping, pledged to stabilise the economy and employment and called for measures to support those affected by the tariffs after a meeting last week.
The US elimination of tariff exemptions for shipments of low-value packages, unveiled amid the universal duty increases, is also “exerting employment pressure” on China’s retail and wholesale sectors, the researchers said.
Trump’s tariff hikes are most likely to impact China’s coastal provinces, said S&P Global Ratings in a statement on Friday, naming Guangdong, Jiangsu, Shandong and Zhejiang as well as Shanghai, a major port and the country’s financial centre.
Tariffs will strain the economies and budget revenues for these areas, which together account for about 40 per cent of national gross domestic product and rank among the biggest Chinese exporters to the US, the ratings agency said. This strain, analysts added, will harm deleveraging efforts.
“Recent tariff hikes at their current levels could have a long-lasting impact on China’s regional economies that trade most actively with the US,” said S&P credit analyst Christopher Yip.
“This comes at a time when local government debt burdens have markedly risen due to a prolonged property downturn, large-scale infrastructure spending and tepid tax revenue growth.”
Goldman Sachs said that, in the past, China’s central bank has tended to cut policy rates when facing a weak labour market.
The bank said Chinese manufacturers might shift production to third countries and ship goods from there to the US without paying the exorbitant duties, though Trump’s temporarily delayed “Liberation Day” tariff package targeted many potential bypass points.
“Since most other countries are not subject to nearly as high tariffs as China, Chinese exporters may try to re-route goods through other countries,” Goldman Sachs said. “Re-routing, together with strong price competitiveness, is likely to maintain Chinese exports to other countries at solid levels.”